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Bitcoin and the Intrinsic Value argument

One of the favourite anti-bitcoin arguments is that of a perceived lack of intrinsic value, although “intrinsic” value is better classified in the 21st century as “utility” value since not all things with value are considered to have “intrinsic” value.

Technology has huge value as a result of its utility – Had email been a commercial pursuit from the get-go it would be worth billions today, not because of some “intrinsic” value, but because of the value of such a revolutionary utility.

Personally I would argue the value of a technology is a form of intrinsic value, and in that sense in the incredibly unique world that is bitcoin, every bitcoin user effectively owns a part of that technology.

Erik Vorhees made the excellent point that “bitcoin” is really two things. The first is “money” as you’d imagine a coin, and the second is the technology of the payment network, cryptographic proof, etc. A “bitcoin” as a unit of currency itself has no value, however since bitcoin the currency is the only currency that can be transacted on the network which is created by the bitcoin technology, the currency effectively inherits the value (intrinsic or utilitarian) of that technology.

In addition to this, there are additional large value features of the bitcoin technology, which cannot be overlooked.

The first is a system of peer review and a hugely active participation in reviewing transactions. Peer review and auditing has value for which corporations pay millions each year – Accuracy in data is valuable enough to create an entire industry ie. that of auditors.

The second is processing power. There are many services where individuals and organisations can rent processing power, one of the most famous of which is the Amazon server offering. Scientists also rent processing power to examine and manipulate insurmountable data obstacles, and these services are not cheap. By comparison the bitcoin network, in a remarkable and self-rewarding ecosystem, has the benefit of a staggering amount of computing power which secures bitcoin and ensures our money is safe and that records of our money and transactions are accurate. At present the hardware costs of machines securing the bitcoin network probably amount to about $100million in purchase price, and the 720 Megawatts/day of electricity used to run this hardware runs another $31million/year – all this without putting a value on the infrastructures and countless man hours which come with running this equipment.

Thirdly there is a lot of value in data integrity, and what bitcoin as a technology has created, is the most accurate and widely distributed piece of data in existence. The Blockchain.

And finally there is value in the laws of maths and physics. The simple fact that it is physically impossible to brute force attack the encryption that secures bitcoins is valuable bordering on invaluable. This kind of security has value which cannot be overlooked.

So to all those who think “intrinsic” value is what’s important, and cannot see the value of utility, all I can say is… Join us in the 21st century, we’re ready for you whenever you’d like to arrive.